Exam One Study Guide
Exam One Study Guide ACG2021
Popular in Introduction to Financial Accounting
verified elite notetaker
Popular in Finance
This 3 page Study Guide was uploaded by Nicholas D'Ambrosio on Saturday September 17, 2016. The Study Guide belongs to ACG2021 at University of Florida taught by Jill Kristen Goslinga in Fall 2016. Since its upload, it has received 144 views. For similar materials see Introduction to Financial Accounting in Finance at University of Florida.
Reviews for Exam One Study Guide
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 09/17/16
Exam One Study Guide Chapter One: The core of financial accounting revolves around these 4 basic financial statements: - Income Statement (statement of operations) - Statement of Retained Earnings - Balance Sheet - Statement of Cash Flows A business generally takes one of the following 4 forms: proprietorship, partnership, LLC, or Corporation Continuity Assumption, Historical Cost Principle, Stable monetary unit assumption. Assets = Liabilities + Owner’s Equity Owner’s Equity = Assets - Liabilities Know the 4 financial statements and how to construct them accurately. Chapter Two Know each type of account: Asset, Liability, Stockholder’s Equity. Know how to record each transaction in a T table. - Recognize which account the transaction pertains to. - Determine whether to debit or credit. - Record the transaction. The left side of the T account is called the debit side, the right side is called the credit side. Assets = Liabilities + Stockholder’s Equity Assets Liabilities Common Stock Retained Earnings Debit Credit Debit Credit Debit Credit Debit Credit + - - + - + - + Dividends Revenues Debit Credit Debit Credit + - - + Expenses Debit Credit + - Chapter Three Deferred expense: Entry in Past Adjustment Prepaid Expense xx Expense xx Cash xx Prepaid Expense xx Deferred Revenue: Entry in Past Adjustment Cash xx Unearned Revenue xx Unearned Revenue xx Revenue xx Depreciation: Depreciation Adjustment Equipment xx Depreciation Exp. xx Cash xx Accumulated Depreciation xx Accrued Expense: Adjustment Cash Entry Expense xx Accounts Payable xx Accounts Payable xx Cash xx Accrued Revenue: Adjustment Cash Entry Accounts Receivable xx Cash xx Revenue xx Accounts Receivable xx Because revenues, expenses, and dividends relate to a limited period, they are called temporary accounts. The closing process applies only to temporary accounts. Here are the steps to close the books of a company: - Debit each revenue account for the amount of its credit balance. Credit retained earnings for the sum of the revenues. This process transfers the sum of all revenues into Retained Earnings, therefore increasing retained earnings. - Credit each expense account for the amount of its debit balance. Debit retained earnings for the sum of the expenses. This process transfers the sum of the expenses into retained earnings, therefore decreasing retained earnings. - Credit the dividends account for the amount of its debit balance. Debit retained earnings. This entry places the dividends amount in the debit side of retained earnings. Remember that dividends are not expenses, but represent a permanent reduction of retained earnings. Net Working Capital = Total Current Assets – Total Current Liabilities Total Current Assets Current Ratio = Total Current Liabilities Total Liabilities Debt Ratio = Total Assets The norm for debt ratios for most big companies ranges from 60% - 70%. To keep debt ratios within normal limits, companies use these strategies: - Increase revenue and decrease costs, thus increasing current assets, net income, and retained earnings without increasing liabilities. - Sell stock, thus increasing cash and stockholder’s equity. - Choose to borrow less money.
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'